Will Difficult Decisions Wait Until 2011?

Gerson Lehrman Group has published a well reasoned commentary entitled "Transformation is Essential to Save the Postal Service" Gerson Lehrman Group's interest in the USPS is due to the impact on thousands of privately held and publicly traded companies "from Wells Fargo, Time Inc., and Williams  Sonoma to small businesses and the public, competitors such as UPS and FedEx, and suppliers like Pitney Bowes."

The following paragraphs may be foretelling comments relating to Postal Service's troubles that investment analysts will add to opinions of companies of competitors, customers or suppliers of the Postal Service.

There are two important factors overlaying the changes the PMG feels compelled to propose:  1) many of the proposed changes will require either outright approval or at least non-opposition by Congress; and 2) how will various stakeholders react -- will there be outsized or unintended consequences?

Congress must approve the elimination of Saturday delivery (technically by lifting a ban against reducing days of delivery), mandate any changes to retiree health prefunding or flexibility in pricing, and not oppose the restucturing likely to be at the heart of USPS' cost-cutting measures.  Whether Congress will be willing to make any of these changes, other than the minimum to keep the institution solvent, as it did in 2009, is an open question.  On the one hand, Congress cannot permit the system to become insolvent, but on the other ending Saturday delivery may prove more unpopular than many think.  Neither is a palatable option in an election year.  So, 2011 looks to be likely the year for the more difficult decisions.

For companies that rely on the mail and face financial challenges themselves, the 5% emergency increase offered as a possibility by the PMG, would be problematic.  With unprecedented opportunities to move mail out of the system, it may prove far more economic to spend the difference on more servers, software, training, and incentives to customers.  Losing Saturday delivery would also be troubling to marketers who want their promotions to land on doorsteps on Saturday mornings, charities, political organizations and financial institutions losing "float" through delayed statements and remittances, insurance companies with statutory notice and other mailed requirements in all 50 states, small newspapers which deliver through the mail on Saturdays, and the list goes on.  How much will that cause them to turn to the Internet or elsewhere?

For competitors, much will depend on whether the Postal Service also raises prices on its "competitive" classes, such as Priority Mail or parcels.  Will loss of Saturday delivery or charging a premium for it for certain services open an opportunity for market share growth to competitors?

For the labor unions, what concessions will be asked on compensation, benefits and work rules?  Can they afford them -- can they afford not to? [emphasis added]

The author of the Gerson Lehrman Group asks good questions.   Now is the time for answers.